South Star Battery Secures Financing via Streaming Deal
Mining is a capital-intensive business. Juniors spend tens of millions just to define a resource and then have to invest up to hundreds of millions to actually get into production. South Star Battery Metals (STS-V) just jumped the queue.
South Star’s primary graphite project is the Santa Cruz project in Southern Bahia Brazil. Brazil is the 2nd largest producer of graphite in the world with production going back some eighty years.
South Star plans on a two-phase plan for going into production with a Phase 1 fully permitted 5,000 TPY mill. Phase 2 calls for 25,000-30,000 TPY production. The company believes they can construct Phase 1 for $8 million and Phase 2 for $27 million.
Santa Cruz comes with P&P reserves of 295,400 tonnes of graphite. The mine has a current planned life of twelve years.
South Star entered into a binding agreement with Sprott Resource Streaming and Royalty on the 5th of April calling for Sprott to put up to $28 million USD as a prepayment for graphite concentrate from the Santa Cruz mine. The Phase 1 stream will fully finance the Phase 1 plant for Santa Cruz. An additional Phase 2 stream will provide most of the financing for the Phase 2 plant. The details are long, cumbersome and confusing so I highly suggest potential investors study the agreement to understand it.
South Star is now saying they can be in commercial production in the Phase 1 plant in Q2 of 2023. The post stream life of mine EDITDA still allows for a 51% margin, which is excellent.
The company has about 27 million warrants outstanding at an average of $.13. They are barely in the money and still have two years to run so will provide an additional $3.5 million in cash. As part of the streaming deal STS is required to do a $6 million financing so the Toronto/Vancouver sharks have been forcing down the price in order to participate in the financing at the price of a close out sale.
The website for STS is outdated and has several broken links. STS has another excellent graphite project in Alabama yet fails to discuss it on their site other than in press releases. We can only hope that getting an injection of funds into the company will encourage management to pay a little more attention to details.
South Star is an advertiser and I have participated in a previous private placement. Do your own due diligence.
South Star Battery Metals Corp